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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9411
------------------
BAILEY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------
DELAWARE 13-3229215
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
700 LAFAYETTE ROAD
P.O. BOX 307
SEABROOK, NEW HAMPSHIRE 03874
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
----------------
(603) 474-3011
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
--------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
NUMBER OF SHARES OUTSTANDING
TITLE OF EACH CLASS AT JUNE 4, 1996
------------------- ---------------
COMMON STOCK, $.10 PAR VALUE 5,357,058
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Part I. FINANCIAL INFORMATION.
Item 1. Financial Statements
The condensed consolidated financial statements included herein have
been prepared by Bailey Corporation (the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. While
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, the
Company believes that the disclosures made herein are adequate to make the
information not misleading. It is recommended that these condensed statements be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the fiscal year ended July 30,
1995.
In the opinion of the Company all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of Bailey Corporation and Subsidiaries as of April 28, 1996, the results of
their operations for the three and nine months ended April 28, 1996 and April
30, 1995 and the cash flows for the nine months then ended, have been included.
1
BAILEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
APRIL 28, 1996 AND JULY 30, 1995
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Apr 28 Jul 30
1996 1995
---- ----
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 402 $ 313
Restricted cash -- 817
Accounts receivable 27,415 13,751
Inventories:
Raw materials 7,019 7,424
Work-in-process 3,549 2,555
Finished goods 3,520 2,745
Tooling 5,922 5,601
---------- ----------
Total inventories 20,010 18,325
Prepaid expenses and other current assets 4,376 4,026
Deferred income taxes 3,709 3,709
---------- ----------
Total current assets 55,912 40,941
PROPERTY, PLANT AND EQUIPMENT, NET 49,779 50,391
OTHER ASSETS, NET 9,062 9,389
---------- ----------
$ 114,753 $ 100,721
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 1,320 $ 1,585
Short-term debt 16,536 9,360
Current portion of long-term debt 9,721 7,765
Accounts payable 31,545 18,611
Accrued liabilities and other current liabilities 5,882 5,535
Income taxes payable -- 167
---------- ----------
Total current liabilities 65,004 43,023
LONG-TERM DEBT, less current portion 30,916 33,136
OTHER LONG-TERM LIABILITIES 2,227 2,245
DEFERRED INCOME TAXES 3,437 3,437
---------- ----------
Total liabilities 101,584 81,841
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 540 539
Additional paid-in capital 13,817 13,805
Retained earnings (522) 5,202
Minimum pension liability adjustment (403) (403)
Treasury stock (263) (263)
---------- ----------
Total stockholders' equity 13,169 18,880
---------- ----------
$ 114,753 $ 100,721
========== ==========
</TABLE>
2
BAILEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE AND NINE MONTHS ENDED APRIL 28, 1996 AND APRIL 30, 1995
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Apr 28 Apr 30 Apr 28 Apr 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $48,766 $47,729 $128,681 $133,963
------- ------- -------- --------
COST AND EXPENSES:
Cost of products sold 43,149 41,931 121,643 115,946
Selling, general and administrative expenses 3,739 3,834 10,974 10,921
----- ----- ------ ------
Operating income (loss) 1,878 1,964 (3,936) 7,096
INTEREST EXPENSE (NET) 1,219 969 3,597 2,721
----- --- ----- -----
Income (loss) before income taxes 659 995 (7,533) 4,375
INCOME TAX PROVISION (BENEFIT) 212 407 (1,809) 1,792
--- --- ------ -----
Net income (loss) $ 447 $ 588 $ (5,724) $ 2,583
======= ======= ======== ========
NET INCOME (LOSS) PER COMMON SHARE:
Primary $ .08 $ .11 $ (1.05) $ .47
------- ------- -------- --------
Fully diluted $ .08 $ .11 $ (1.05) $ .46
------- ------- -------- --------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary 5,578,000 5,443,000 5,450,000 5,448.000
--------- --------- --------- ---------
Fully diluted 5,578,000 6,468,000 5,450,000 6,473,000
--------- --------- --------- ---------
</TABLE>
3
BAILEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE NINE MONTHS ENDED APRIL 28, 1996 AND APRIL 30, 1995
<TABLE>
<CAPTION>
Nine Months Ended
Apr 28 Apr 30
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(5,724) $2,583
------- ------
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 4,285 3,986
Change in assets and liabilities net of effects of acquisitions:
Increase in accounts receivable (13,665) (1,535)
Increase in inventories (1,681) (5,408)
Increase in prepaid expenses and other current assets (349) (659)
Decrease (increase) in other assets, net 318 (756)
Increase in accounts payable 12,930 6,616
Increase (decrease) in accrued liabilities
and other current liabilities 1,014 (1,864)
(Decrease) increase in income taxes payable (167) 368
Decrease in other liabilities (18) (61)
--- ---
Net cash used in operating activities (3,057) 3,270
------ -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,078) (5,977)
------ ------
Net cash used in investing activities (3,078) (5,977)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt (including bank overdrafts), net 6,911 4,792
Payments on long-term debt and capital leases (1,517) (1,239)
Purchase of treasury stock -- (263)
Proceeds from exercises of stock options 13 26
Decrease in restricted cash 817 --
---- ----
Net cash provided by financing activities 6,224 3,316
----- -----
Net increase in cash 89 609
CASH, beginning of period 313 201
--- ---
CASH, end of period $ 402 $ 810
-------- ------
CASH PAID FOR:
Interest $ 3,090 $2,158
Income taxes 208 1,131
SUPPLEMENTAL DISCLOSURES:
Assets acquired under capitalized leases $ 586 $1,373
Conversion of accrued interest into short-term debt 667 --
</TABLE>
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
THIRD QUARTER FISCAL 1996 VS THIRD QUARTER FISCAL 1995
Net sales for the third fiscal quarter ended April 28, 1996, increased
$1.1 million, or 2.2%, to $48.8 million, compared to $47.7 million in the third
quarter of fiscal 1995. Sales in the third quarter included $18.3 million of new
and/or replacement products introduced since the beginning of the year and $4.0
million of higher sales of certain products carried over from the prior year.
These sales increases were offset by a) $15.2 million of sales eliminated due to
the discontinuation of products for prior year models, and b) $6.0 million of
lower sales of certain carryover products.
Gross profit in the third quarter ended April 28, 1996 decreased
$181,000, or 3.1%, to $5.6 million, compared to gross profit of $5.8 million in
the third quarter of fiscal 1995. As a percentage of net sales, gross profit was
11.5% compared to a gross profit of 12.1% in the same period of the prior year.
The decrease in gross profit is primarily attributable to comparatively lower
average unit margins on the product mix comprising total sales in the 1996 third
quarter compared to the product mix sold in the third quarter of last year. The
decrease in gross profit is also attributable to certain selling price
reductions that took effect in January 1996.
Selling, general and administrative expenses decreased $95,000, or 2.5%,
for the three months ended April 28, 1996 to $3.7 million, compared to $3.8
million for the same period of fiscal 1995. As a percentage of net sales,
selling, general and administrative expenses decreased to 7.7% in the third
quarter this year compared to 8.0% in the 1995 period. The nominal reduction in
selling, general and administrative expenses for the third quarter of fiscal
1996 is primarily attributable to economies resulting from the transfer of
certain engineering and
5
technical functions from several operating plants to the Company's technical
facilities in Dearborn, Michigan.
Interest expense in the third fiscal quarter ended April 28, 1996
increased $250,000, or 25.8%, to $1.2 million compared to $969,000 in the third
quarter of fiscal 1995. The increase was due to a higher average level of
borrowing under the Company's revolving line of credit.
The Company's effective tax rate was 32.2% on pre-tax income of $659,000
in the third quarter ended April 28, 1996 compared to an effective tax rate of
40.9% on pre-tax income of $995,000 in the 1995 third quarter. The lower
effective tax rate for the third quarter this year is due to the fact that
pre-tax losses incurred during the first six months of the current fiscal year
exceeded the amount the Company was eligible to carryback to prior years, and
accordingly, the Company had the benefit of a net operating loss carryforward
for utilization against the taxable income earned in the third fiscal quarter
ended April 28, 1996.
As a result of the foregoing, net income in the third quarter ended
April 28, 1996 decreased $141,000, or 24.0%, to $447,000 compared to $588,000 in
the third quarter of the prior year. Net income per share declined 27.3%, or
$.03, to $.08 in the third quarter of fiscal 1996 compared to $.11 in the prior
year period.
FIRST NINE MONTHS FISCAL 1996 VS FIRST NINE MONTHS FISCAL 1995
Net Sales in the nine months ended April 28, 1996, decreased $5.3
million, or 3.9%, to $128.7 million compared to $134.0 million in the first nine
months of the prior fiscal year. Sales in the fiscal first nine months included
$34.1 million of new and/or replacement products introduced during the period
and $17.8 million of higher sales of products carried over from last year. These
sales increases were offset by a) $42.8 million of sales eliminated due to
discontinuation of pro-
6
ducts for prior year models, and b) $14.4 million of lower sales of certain
carryover products.
Gross profit for the nine months ended April 28, 1996 decreased $11.0
million, or 60.9%, to $7.0 million, compared to $18.0 million in the fiscal 1995
first nine months. As a percentage of net sales, gross profit for the first nine
months this year was 5.5% compared to 13.4% in the same period of the prior
year. Contributing to the substantially lower gross profit during the nine
months ended April 28, 1996 were the comparatively lower sales, a product mix
carrying narrower unit margins, a significant concentration of new product
launches, and certain selling price reductions that took effect in January 1996.
The Company also experienced relatively higher raw material costs that impacted
operating performance during the first three months of the nine month period.
Selling, general and administrative expenses in the nine months ended
April 28, 1996 increased slightly to $11.0 million compared to $10.9 million in
the fiscal 1995 nine months. As a percentage of net sales, selling, general and
administrative expenses were 8.5% in the nine months compared to 8.2% in the
same period of the prior year. The difference was primarily due to the
comparatively lower sales volume in the nine months this year.
Interest expense in the nine months ended April 28, 1996 increased
$876,000, or 32.2%, to $3.6 million compared to $2.7 million in the 1995 fiscal
nine months. The increase was due to higher average utilization of the Company's
revolving line-of-credit.
For the nine months ended April 28, 1996, before provision for income
taxes, the Company incurred a loss of $7.5 million compared to pre-tax income of
$4.4 million earned in the nine month period of the prior year. Due to the
carryback of the nine-month net operating loss to prior years, an income tax
benefit was available at an effective rate of 24% compared to an income tax
expense rate of 41% for the first nine months of fiscal 1995.
7
For the nine months ended April 28, 1996, the Company incurred a net
loss of $5.7 million, or $1.05 per share, compared to net income of $2.6
million, or $.46 per share- earned in the first fiscal nine months of the prior
year. The negative operating performance for the first nine months of fiscal
1996 was most pronounced in the first two quarters of the fiscal period. The
most significant causes of adverse operating results during the first fiscal six
months were lower sales, a product mix carrying lower unit margins, and costs
associated with new product launches.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months ended April 28, 1996 activities related to
a series of new product launches required additional investments in inventories
totaling $1.7 million and a $13.7 million increase in accounts receivable. These
increases added to a $5.7 million net loss for the period were offset by
depreciation and amortization of $4.3 million and a $12.9 million increase in
accounts payable resulting in net use of cash in operating activities of $3.1
million. This employment of cash in operations plus capital expenditures of $3.1
million in the first nine months were funded primarily by a $6.9 million
increase in utilization of the Company's revolving line-of-credit.
As a result of the foregoing, at April 28, 1996 total capitalization was
$44.1 million including long-term debt of $30.9 million, or 70%, and
stockholders' equity of $13.2 million, or 30%, of total capitalization.
Meanwhile, during the first nine months net working capital decreased $7.0
million with the result that at April 28, 1996 the current ratio was .86 to 1.
As a result of the foregoing, during the nine months ended April 28,
1996 there were conditions of non-compliance with technical covenants of certain
of the Company's debt agreements. The holders thereof were advised and the
8
Company undertook negotiations for waivers and/or amendments. Accordingly,
during March and April 1996, the Company entered into agreements with the
holders of certain debt obligations which provide, among other things, for the
rescheduling and extension of principal and interest payment due dates thereby
avoiding and/or eliminating defaults and conditions of non-compliance with
technical covenants of the debt agreements.
Also during the third quarter, in addition to the measures undertaken to
restore operations to profitable levels, the Company began pursuing alternatives
for additional sources of liquidity to meet forecasted requirements. Several
such alternatives have been identified and are continuing to be explored and
considered.
9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 2, 1994, the Company was served with a summons and
complaint with respect to Vicki Match Suna and Lori Rosen v. Bailey
Corporation, a purported class action suit brought in the United States
District Court for the District of New Hampshire. The complaint alleged
that the Company violated Rule 10b-5 of the Securities and Exchange Act
of 1934 by a purported dissemination of misleading information as to
its financial position in connection with the purchase and sale of its
securities. The Company was successful in having the complaint
dismissed, and also in rebuffing the plaintiffs' attempt to file an
amended complaint. The Court allowed the plaintiffs to make one more
attempt, however, and on September 1, 1995, a second amended complaint
was filed.
The Company moved to dismiss the plaintiff's amended
complaint. The court granted the Company's motion. On January 23,1996,
the plaintiffs appealed the decision of the court. The Company believes
the appeal is without merit and intends to defend it.
With respect to other legal proceedings, reference is made to
the Company's Annual Report on Form 10-K for the fiscal year ended
July, 30, 1995, filed with the Securities and Exchange Commission on
October 30, 1995.
Item 5. Other Information.
On June 5, 1996, the Company entered into an agreement and
plan of merger with Vemco Acquisition Corp., ("Vemco") a Delaware
Corporation and wholly owned subsidiary of Venture Holdings Trust of
Fraser, Michigan ("Venture"). The agreement calls for Vemco to commence
a cash tender offer for all outstanding shares of the Company's common
stock, $.10 par value, for $8.75 per share. Pursuant to the agreement,
on June 11, 1996, Vemco commenced the cash tender offer.
The offer is conditioned upon, among other things, (1) there
being validly tendered prior to the expiration of the offer that number
of shares of the Company's common stock which, together with the shares
then owned by Vemco or Venture, represents at least a majority of the
shares of the Company's common stock outstanding on a fully-diluted
basis, (2) Venture having received the financing contemplated by a
commitment letter, dated June 3, 1996, from NBD Bank pursuant to which
NBD Bank has committed to provide the financing necessary to purchase
all outstanding shares of
10
the Company's common stock pursuant to the offer and to refinance all
outstanding indebtedness of the Company reflected on its reports filed
with the Securities and Exchange Commission, (3) the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
having expired or terminated, and (4) the Company having given notice
of redemption for all convertible debentures which are redeemable at
the Company's option in accordance with their terms.
Vemco has entered into agreements with Roger R. Phillips,
William A. Taylor, Louis T. Enos, E Gordon Young, John G. Owens and
Allan B. Freedman, directors and executive officers of the Company,
pursuant to which each individual has granted an option to Venture to
acquire all of the shares of the Company's common stock beneficially
owned by them, to tender into the offer their Company shares
(representing approximately 28.5% of the Company's outstanding shares
on a fully-diluted basis); and to vote their shares in favor of the
merger at any stockholders meeting that may be required to complete the
acquisition.
Following the successful consummation of the tender offer,
Vemco will be merged with and into the Company (the Company will be the
surviving corporation) and the stockholders of the Company will receive
$8.75 in cash for each of their shares of the Company's common stock.
In connection with the tender offer and plan of merger, on
June 5, 1996 Vemco (the "Purchaser") entered into indemnity agreements
with each of the directors and the chief financial officer of the
Company (the "Indemnitees"), The agreements provide that among other
things, under specified circumstances and subject to applicable laws
and the Company's certificate of incorporation and bylaws, Purchaser
will provide indemnification for all expenses reasonably incurred in
the event that an Indemnitee becomes a participant in a proceeding by
reason of or arising from an indemnifiable event - all as defined in
the indemnity agreements. The indemnification will continue until the
later of six years after the Indemnitee ceases to serve as a director
or officer of the Company or the time of the final termination of all
pending proceedings as to which the Indemnitee has the right to
indemnification.
Also in connection with the tender offer and plan of merger,
on June 5, 1996 Louis T. Enos, Allan B. Freedman, John G. Owens and E
Gordon Young, each of whom is a director of the Company, entered into
noncompetition agreements with the Company. Under the agreements, each
individual agrees that for a period of five years following
consummation of the merger he will not engage in competition (as
defined in the agreements) with the Company or the Purchaser. The
agreements also provide that commencing with the first day of the first
calendar month following the consummation of the merger, the Company
will a) pay the individuals (or his estate or heirs) $5,000 per month
for 60 months; b) retain the individual and his spouse on the Company's
long term health insurance policy until age 65, if and as long as
permitted by applicable laws and the Com-
11
pany's health care provider, and c) from age 65 until their death the
Company will pay the monthly cost of Medicare Plan (b) and the AARP
Supplemental Insurance Plan (f) or its equivalent. In the event that
the individual and his spouse cease to be covered by the aforementioned
health insurance plans, the Company will purchase equivalent insurance
for them.
Also on June 5, 1996, the Company entered amendments to
employment and noncompetition agreements with Roger R. Phillips, the
Company's chief executive officer, and William A. Taylor, the Company's
senior vice president. The agreement with Mr. Phillips provides for the
extension of his term of employment to December 31, 1997 and the
commencement of his noncompetition agreement on January 1, 1998. The
agreement with Mr. Taylor provides for the termination of his
employment on the last day of the month in which the merger is
consummated and the commencement of his noncompetition agreement on the
following day. Both Mr. Phillips and Mr. Taylor's noncompetition
agreements include the same provisions as to term, payments and
benefits as the aforementioned noncompetition agreements with Mssrs.
Enos, Freedman, Owens and Young.
In connection with the agreement and plan of merger, on June
5, 1996 several corporate affiliates of the Purchaser (the
"Guarantors") entered into a guarantee agreement with the Company and
its directors and its chief financial officer (the "Beneficiaries").
Under the Guarantee, the Guarantors jointly and severally
unconditionally guaranteed to the Company and the Beneficiaries the
full performance of the Purchaser as to all of its obligations under
the aforementioned agreement and plan of merger, the indemnity
agreements, the noncompetition agreements and the amendments to
employment and noncompetition agreements. The Guaranty also provides
for recovery by the Company and the Beneficiaries of all costs and
expenses incurred by them as a result of the enforcement of the
Guarantors' obligations, including attorneys' fees.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index is set forth below.
(b) None.
12
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE METHOD OF FILING
<S> <C> <C>
3.1 Certificate of Incorporation Incorporated by reference
from Form 10-K, Exhibit 3.01,
filed on October 24, 1992
3.2 Amended and Restated By-Laws Incorporated by reference from
Form 10-K, Exhibit 3.2, filed
on October 30, 1995
4.1 Stockholder Rights Agreement, dated Incorporated by reference
as of September 28, 1995, between from Form 8-K, Exhibit 4(a)
Bailey Corporation and State Street filed on October 2, 1995
Bank and Trust Company, as Rights
Agent
10.01 Amended and Restated Agreement of Incorporated by reference
Purchase and Sale, dated May 5, 1992, from Form 8-K, Exhibit 2.01
and effective as of April 9, 1992 filed on July 13, 1992
10.02 Subordinated Debenture due June 25, Incorporated by reference
1995, in the amount of $200,000 from Form 8-K, Exhibit 4.01
issued to Anthony A. Martino filed on July 13, 1992
10.03 Warrant to Purchase 50,000 Shares Incorporated by reference
of Common Stock of Bailey Corporation from Form 8-K, Exhibit 4.02
dated June 26, 1992, as issued to filed on July 13, 1992
Anthony A. Martino
10.04 Subordinated Debenture due June 26, Incorporated by reference
1995, in the amount of $50,000 issued from Form 8-K, Exhibit 4.03
to Allan B. Freedman filed on July 13, 1992
10.05 Warrant to Purchase 12,500 Shares Incorporated by reference
of Common Stock of Bailey Corporation from Form 8-K, Exhibit 4.04
dated June 26, 1992, as issued to filed on July 13, 1992
Allan B. Freedman
10.06 Subordinated Debenture due June 26, Incorporated by reference
1995, in the amount of $50,000 issued from Form 8-K, Exhibit 4.05
to self-directed pension account FBO filed on July 13, 1992
Roger R. Phillips
10.07 Subordinated Debenture due June 26, Incorporated by reference
1995, in the amount of $50,000 issued from Form 8-K, Exhibit 4.06
to William A. Taylor filed on July 13, 1992
10.08 Subordinated Debenture due June 29, Incorporated by reference
1995, in the amount of $50,000 issued from Form 8-K, Exhibit 4.07
to self-directed pension account FBO filed on July 13, 1992
Roger R. Phillips
10.09 Subordinated Debenture due June 26, Incorporated by reference
1995, in the amount of $50,000 issued from Form 8-K, Exhibit 4.08
to Louis T. Enos filed on July 13, 1992
10.10 Subordinated Debenture due June 26, Incorporated by reference
1995, in the amount of $50,000 issued from Form 8-K, Exhibit 4.09
to John G. Owens filed on July 13, 1992
10.11 Subordinated Debenture due June 26, Incorporated by reference
1995, in the amount of $50,000 issued from Form 8-K, Exhibit 4.10
to E Gordon Young filed on July 13, 1992
10.12 Conformed copy of Subordinated Incorporated by reference
Debenture Purchase Agreement from Form 8-K, Exhibit 4.11
entered into by Louis T. Enos, John filed on July 13, 1992
G. Owens, and E Gordon Young with
Bailey Corporation
10.13 Conformed copy of Subordinated Incorporated by reference
Debenture and Warrant Purchase from Form 8-K, Exhibit 4.12
Agreement entered into by Allan B. filed on July 13, 1992
Freedman, Anthony A. Martino, Orion
Group Money Purchase Plan FBO, Roger
R. Phillips and William A. Taylor
with Bailey Corporation
10.14 Warrant to Purchase 115,794 Shares Incorporated by reference
of Common Stock of Bailey Corporation from Form 10-K, Exhibit 4.13
issued to Heller Financial, Inc. filed on October 24, 1992
dated November 16, 1988
10.15 Stock and Note Purchase Agreement Incorporated by reference
dated April 13, 1993 from Registration Statement
on Form S-3, Registration No.
33-62698
10.16 Form of 9% Convertible Subordinated Incorporated by reference
Promissory Note Due 2000 from Registration Statement
on Form S-3, Registration No.
33-62698
10.17 Lease between Rall Leasing, Ltd. Incorporated by reference
(Landlord) and Bailey Corporation from Form 10-K, Exhibit 10.01
(Tenant) for premises located in filed on October 24, 1992
Cuba, Missouri, dated November 1,
1985, together with Assignment by
Rall Leasing, Ltd. to Rall Leasing
Associates
10.18 Bailey Corporation 1986 Incentive Incorporated by reference
Stock Option Plan from Form 10-K, Exhibit 10.02
filed on October 24, 1992
10.19 Lease for Dearborn, Michigan Incorporated by reference
premises dated December 11, 1991, from Form 10-K, Exhibit 10.03
between Ford Motor Land Development filed on October 24, 1992
Corporation and Bailey Manufactur-
ing Corporation
10.20 Long-Term Agreement between Ford Incorporated by reference
Motor Company and Bailey from Form 10-K, Exhibit 10.04
Manufacturing Corporation dated filed on October 24, 1992
June 24, 1992 and effective for the
term August 1, 1992 to December 31,
1995
10.21 Employment and Option Agreement Incorporated by reference
between Bailey Transportation from Form 8-K, Exhibit 28.1
Products, Inc. and Anthony A. Martino filed on July 13, 1992
dated as of June 26, 1992
10.22 Non-Negotiable Working Capital Note Incorporated by reference
dated June 26, 1992, in the amount from Form 8-K, Exhibit 28.2
of $500,000 from Bailey Transpor- filed on July 13, 1992
tation Products, Inc. and payable
to TransPlastics, Inc.
10.23 Non-Negotiable Purchase Note dated Incorporated by reference
June 26, 1992, in the amount of from Form 8-K, Exhibit 28.3
$1,868,953 from Bailey Transpor- filed on July 13, 1992
tation Products, Inc. and payable
to TransPlastics, Inc.
10.24 Trust Agreement dated as of April Incorporated by reference
1, 1988, between the State of Ohio from Form 10-K, Exhibit 10.08
and The Provident Bank, Trustee filed on October 24, 1992
10.25 Twenty-Eighth Supplemental Trust Incorporated by reference
Agreement dated as of July 1, 1992, from Form 10-K, Exhibit 10.09
between the State of Ohio and The filed on October 24, 1992
Provident Bank, Trustee
10.26 Ohio State Economic Development Incorporated by reference
Revenue Bond in the amount of from Form 10-K, Exhibit 10.10
$3,170,000 as issued to The filed on October 24, 1992
Prudential Insurance Company of
America
10.27 Guaranty Agreement dated as of July Incorporated by reference
1, 1992, among Bailey Corporation, from Form 10-K, Exhibit 10.11
Bailey Transportation Products, filed on October 24, 1992
Inc. and The Provident Bank, Trustee
10.28 Lease dated July 1, 1992, between Incorporated by reference
the Director of Development of the from Form 10-K, Exhibit 10.12
State of Ohio and Bailey filed on October 24, 1992
Transportation Products, Inc.
10.29 Amended and Restated Credit Incorporated by reference
Agreement among BayBank, Bailey from Form 10-K, Exhibit 10.13
Corporation, and Bailey filed on October 24, 1992
Manufacturing Corporation
dated April 30, 1992
10.30 First Amendment to Amended and Incorporated by reference
Restated Credit Agreement among from Form 10-K, Exhibit 10.14
BayBank, Bailey Corporation, filed on October 24, 1992
and Bailey Manufacturing
Corporation dated June 26, 1992
10.31 Second Amendment to Amended and Incorporated by reference
Restated Credit Agreement among from Registration Statement
BayBank, Bailey Corporation, on Form S-2, Registration No.
and Bailey Manufacturing 33-66244
Corporation dated July 26, 1992
10.32 Third Amendment to Amended and Incorporated by reference
Restated Credit Agreement among from Registration Statement
BayBank, Bailey Corporation, on Form S-2, Registration No.
and Bailey Manufacturing 33-66244
Corporation dated January 29, 1993
10.33 Consent and Fourth Amendment to Incorporated by reference
Amended and Restated Credit from Registration Statement
Agreement among BayBank, Bailey on Form S-2, Registration No.
Corporation, and Bailey Manufac- 33-66244
turing Corporation dated July 1, 1993
10.34 Loan Agreement dated as of July 29, Incorporated by reference
1992, between the Director of from Form 10-K, Exhibit 10.15
Development of the State of Ohio and filed on October 24, 1992
Bailey Transportation Products,
Inc.
10.35 Promissory Note dated July 29, 1992, Incorporated by reference
in the principal amount of $1,000,000 from Form 10-K, Exhibit 10.16
from Bailey Transportation Prod- filed on October 24, 1992
ucts, Inc. payable to the Director
of Development of the State of Ohio
10.36 Subordination Agreement dated as of Incorporated by reference
July 26, 1992, among Bailey from Form 10-K, Exhibit 10.17
Transportation Products, Inc., the filed on October 24, 1992
Director of Development of the State
of Ohio, The Provident Bank, Trustee,
and Ashtabula County 503 Corporation
10.37 Guaranty dated as of July 29, 1992, Incorporated by reference
by Bailey Corporation to the Director from Form 10-K, Exhibit 10.18
of Development of the State of Ohio filed on October 24, 1992
10.38 Bill of Sale from Bailey Corporation Incorporated by reference
and Bailey Manufacturing Corpora- from Form 10-K, Exhibit 10.19
tion to Anthony A. Martino for one filed on October 24, 1992
Farrel Injection Molding Machine
dated August 17, 1992
10.39 Lease and Security Agreement for Incorporated by reference
Farrel Injection Molding Machine from Form 10-K, Exhibit 10.20
between Anthony A. Martino (Lessor) filed on October 24, 1992
and Bailey Transportation Products,
Inc. (Lessee) dated August 17, 1992
10.40 Lease and Security Agreement for Incorporated by reference
Farrel Injection Molding Machine from Registration Statement
between Anthony A. Martino (Lessor) on Form S-2, Registration No.
and Bailey Transportation Products, 33-66244
Inc. (Lessee) dated November 19, 1992
10.41 Lease and Security Agreement for Incorporated by reference
Farrel Injection Molding Machine from Registration Statement
between Anthony A. Martino (Lessor) on Form S-2, Registration No.
and Bailey Transportation Products, 33-66244
Inc. (Lessee) dated March 1, 1993
10.42 Agreement for Purchase and Sale of Incorporated by reference
Assets between Bailey Corporation, from Registration Statement
Bailey Manufacturing Corporation on Form S-2, Registration No.
and The Boler Company. regarding 33-66244
Bailey Corporation's purchase of the
assets and business of the Contour
division of The Boler Company. dated
July 1, 1993
10.43 Indemnification Agreement between Incorporated by reference
Bailey Corporation, Bailey Manu- from Registration Statement
facturing Corporation, and The Boler on Form S-2, Registration No.
Company. dated July 1, 1993 33-66244
10.44 Non-Negotiable Fixed Asset Note in Incorporated by reference
the amount of $5,046,730 given by from Registration Statement
Bailey Corporation and Bailey on Form S-2, Registration No.
Manufacturing Corporation to The 33-66244
Boler Company. dated July 1, 1993
10.45 Non-Negotiable Working Capital Incorporated by reference
Promissory Note in the amount of from Registration Statement
$1,174,606 given by Bailey on Form S-2, Registration No.
Corporation and Bailey Manufactur- 33-66244
ing Corporation to The Boler Company.
dated July 1, 1993
10.46 Security Agreement made by Bailey Incorporated by reference
Manufacturing Corporation in favor from Registration Statement
of The Boler Company. dated July 1, on Form S-2, Registration No.
1993 33-66244
10.47 Remediation Agreement executed by Incorporated by reference
The Boler Company. in favor of Bailey from Registration Statement
Corporation and Bailey Manufactur- on Form S-2, Registration No.
ing Corporation dated July 1, 1993 33-66244
10.48 Form of Option Agreement between Incorporated by reference
Bailey Corporation and Roger R. from Form 10-K, Exhibit 10.48
Phillips filed on October 29, 1993
10.49 Form of Employment Agreement between Incorporated by reference
Bailey Corporation and Roger R. from Form 10-Q, Exhibit 10.49
Phillips filed on March 14, 1994
10.50 Form of Employment Agreement between Incorporated by reference
Bailey Corporation and William A. from Form 10-Q, Exhibit 10.50
Taylor filed on March 14, 1994
10.51 Form of Noncompetition Agreement Incorporated by reference
between Bailey Corporation and Roger from Form 10-Q, Exhibit 10.51
R. Phillips filed on March 14, 1994
10.52 Form of Noncompetition Agreement Incorporated by reference
between Bailey Corporation and from Form 10-Q, Exhibit 10.52
William A. Taylor filed on March 14, 1994
10.53 Form of Noncompetition Agreement Incorporated by reference
between Bailey Corporation and Louis from Form 10-Q, Exhibit 10.53
T. Enos filed on March 14, 1994
10.54 Form of Noncompetition Agreement Incorporated by reference
between Bailey Corporation and Allan from Form 10-Q, Exhibit 10.54
B. Freedman filed on March 14, 1994
10.55 Form of Noncompetition Agreement Incorporated by reference
between Bailey Corporation and John from Form 10-Q, Exhibit 10.55
G. Owens filed on March 14, 1994
10.56 Form of Noncompetition Agreement Incorporated by reference
between Bailey Corporation and E from Form 10-Q, Exhibit 10.56
Gordon Young filed on March 14, 1994
10.57 Asset Purchase and Sale Agreement Incorporated by reference from
between Bailey Corporation and Exhibit 2.1 to Current Report
Premix/E.M.S. Inc., dated as of July on Form 8-K filed on August
31, 1994 18, 1994
10.58 Secured Promissory Note by Bailey Incorporated by reference
Corporation in favor of Premix- from Form 10-K, Exhibit 10.58
/E.M.S. Inc., dated August 3, 1994 filed on October 31, 1994
10.59 8% Convertible Debenture due 1999 Incorporated by reference
by Bailey Corporation in favor of from Form 10-K, Exhibit 10.59
Premix/E.M.S. Inc., dated August 3, filed on October 31, 1994
1994
10.60 Purchase Money First Mortgage and Incorporated by reference
Security Agreement by Bailey from Form 10-K, Exhibit 10.60
Corporation in favor of Premix- filed on October 31, 1994
/E.M.S. Inc., dated as of July 31,
1994, with respect to Lancaster, Ohio
site
10.61 Purchase Money First Mortgage and Incorporated by reference
Security Agreement by Bailey from Form 10-K, Exhibit 10.61
Corporation in favor of Premix- filed on October 31, 1994
/E.M.S. Inc., dated as of July 31,
1994, with respect to Hartford City,
Indiana site
10.62 Purchase Money First Mortgage and Incorporated by reference
Security Agreement by Bailey from Form 10-K, Exhibit 10.62
Corporation in favor of Premix- filed on October 31, 1994
/E.M.S. Inc., dated as of July 31,
1994, with respect to Portland,
Indiana site
10.63 Non-Environmental Indemnification Incorporated by reference
Agreement between Bailey Corpora- from Form 10-K, Exhibit 10.63
tion and Premix/E.M.S. Inc., dated filed on October 31, 1994
as of July 31, 1994
10.64 Environmental Indemnification Incorporated by reference
Agreement between Bailey Corpora- from Form 10-K, Exhibit 10.64
tion and Premix/E.M.S. Inc., dated filed on October 31, 1994
as of July 31, 1994
10.65 Amended and Restated Credit Agreement Incorporated by reference
among BayBank, Bailey Corporation, from Form 10-K, Exhibit 10.65
Bailey Manufacturing Corporation, filed on October 31, 1994
and Bailey Transportation Products,
Inc., dated as of July 29, 1994
10.66 Amended and Restated Revolving Note Incorporated by reference
by Bailey Corporation, Bailey from Form 10-K, Exhibit 10.66
Manufacturing Corporation, and filed on October 31, 1994
Bailey Transportation Products,
Inc., in favor of BayBank, dated July
29, 1994
10.67 Term Note by Bailey Corporation, Incorporated by reference
Bailey Manufacturing Corporation, from Form 10-K, Exhibit 10.67
and Bailey Transportation Products, filed on October 31, 1994
Inc., in favor of BayBank, dated July
29, 1994
10.68 Amended and Restated Security Incorporated by reference
Agreement by Bailey Corporation in from Form 10-K, Exhibit 10.68
favor of BayBank, dated as of July filed on October 31, 1994
29, 1994
10.69 Amended and Restated Security Incorporated by reference
Agreement by Bailey Manufacturing from Form 10-K, Exhibit 10.69
Corporation in favor of BayBank, filed on October 31, 1994
dated as of July 29, 1994
10.70 Security Agreement by Bailey Incorporated by reference
Transportation Products, Inc., in from Form 10-K, Exhibit 10.70
favor of BayBank, dated as of July filed on October 31, 1994
29, 1994
10.71 Recission Agreement between Bailey Incorporated by reference
Corporation and Louis T. Enos, dated from Form 10-K, Exhibit 10.71
as of September 28, 1994, with filed on October 31, 1994
respect to Noncompetition Agreement
between Bailey Corporation and Louis
T. Enos, dated as of February 14,
1994
10.72 Recission Agreement between Bailey Incorporated by reference
Corporation and Allan B. Freedman, from Form 10-K, Exhibit 10.72
dated as of September 28, 1994, with filed on October 31, 1994
respect to Noncompetition Agreement
between Bailey Corporation and Allan
B. Freedman, dated as of February
14, 1994
10.73 Recission Agreement between Bailey Incorporated by reference
Corporation and John G. Owens, dated from Form 10-K, Exhibit 10.73
as of September 28, 1994, with filed on October 31, 1994
respect to Noncompetition Agreement
between Bailey Corporation and John
G. Owens, dated as of February 14,
1994
10.74 Recission Agreement between Bailey Incorporated by reference
Corporation and E Gordon Young, dated from Form 10-K, Exhibit 10.74
as of September 28, 1994, with filed on October 31, 1994
respect to Noncompetition Agreement
between Bailey Corporation and E
Gordon Young, dated as of February
14, 1994
10.75 First Amendment to Amended and Incorporated by reference from
Restated Credit Agreement among Bailey Form 10-K, Exhibit 10.75 filed
Corporation, Bailey Manufacturing on October 30, 1995
Corporation, Bailey Transportation
Products, Inc. and BayBank, dated as
of September 20, 1994
10.76 Environmental Indemnity Agreement by Incorporated by reference from
Bailey Corporation, Bailey Manufactur- Form 10-K, Exhibit 10.76 filed
ing Corporation, Bailey Transportation on October 30, 1995
Products, Inc. in favor of BayBank,
dated as of October 10, 1994
10.77 Second Amendment to Amended and Incorporated by reference from
Restated Credit Agreement and Form 10-K, Exhibit 10.77 filed
Amendment to Revolving Note among on October 30, 1995
Bailey Corporation, Bailey Manufactur-
ing Corporation, Bailey Transportation
Products, Inc. and BayBank, dated as
of April 6, 1995
10.78 Third Amendment to Amended and Restated Incorporated by reference from
Credit Agreement and Second Amendment Form 10-K, Exhibit 10.78 filed
to Revolving Note among Bailey Corp- on October 30, 1995
oration, Bailey Manufacturing Corporation,
Bailey Transportation Products, Inc. and
BayBank, dated as of May 12, 1995
10.79 Fourth Amendment to Amended and Restated Incorporated by reference from
Credit Agreement, Third Amendment to Form 10-K, Exhibit 10.79 filed
Revolving Note and Modification of Third on October 30, 1995
Amendment to Amended and Restated Credit
Agreement among Bailey Corporation,
Bailey Manufacturing Corporation, Bailey
Transportation Products, Inc. and BayBank,
dated as of July 28, 1995
10.80 Fixed Maturity Carve Out Note dated July Incorporated by reference from
28, 1995, in the amount of $4,000,000 Form 10-K, Exhibit 10.80 filed
from Bailey Corporation, Bailey on October 30, 1995
Manufacturing Corporation and Bailey
Transportation Products, Inc. payable
to BayBank
10.81 Fifth Amendment to Amended and Restated Incorporated by reference from
Credit Agreement and Modification of Form 10-K, Exhibit 10.81 filed
Third and Fourth Amendments, among Bailey on October 30, 1995
Corporation, Bailey Manufacturing
Corporation, Bailey Transportation
Products, Inc. and BayBank, dated as of
September 1, 1995
10.82 Agreement between Bailey Manufacturing Incorporated by reference from
Corporation and Emhart Corporation Form 10-K, Exhibit 10.82 filed
regarding the Solvents Recovery Service on October 30, 1995
of New England Superfund Site and the
Old Southington Landfill Superfund Site,
dated February 10, 1995
10.83 Joint Declaration between Bailey Incorporated by reference from
Manufacturing Corporation and Emhart Form 10-K, Exhibit 10.83 filed
Corporation regarding the Solvents on October 30, 1995
Recovery Service of New England Site
and the Old Southington Landfill Site
10.84 Sixth Amendment to Filed Herewith
Amended and Restated
Credit Agreement among
Bailey Corporation,
Bailey Manufacturing
Corporation, Bailey
Transportation Products,
Inc. and BayBank dated
as of March 1, 1996
10.85 Release and Settlement Filed Herewith
Agreement between
Bailey Corporation and
Premix/E.M.S., Inc.
dated March 14, 1996.
10.86 Extension Agreement Filed Herewith
and Amendment between
Bailey Corporation and
Bailey Manufacturing
Corporation and the
Boler Company dated
April 24, 1996.
11.1 Computation of Filed herewith (included in Condensed
Net Income Per Share Consolidated Statements of Operations
for the three months ended
April 28, 1996 and April 30, 1995)
21.1 Subsidiaries of Bailey Corporation Incorporated by reference from
Form 10-K, Exhibit 22.1 filed
on October 30, 1995
</TABLE>
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
BAILEY CORPORATION
------------------
Registrant
Date: June 12, 1996 /s/ Leonard J. Heilman
-----------------------
Leonard J. Heilman
Executive Vice President -
Finance and Administration,
Treasurer and Assistant Secretary
(principal financial and
accounting officer)
14
SIXTH AMENDMENT TO
AMENDED AND RESTATED
CREDIT AGREEMENT
BAILEY CORPORATION ("Bailey"), a Delaware corporation;, its
wholly-owned subsidiary BAILEY MANUFACTURING CORPORATION ("BMC"), a Delaware
corporation, each with a principal place of business at 700 Lafayette Road, P.O.
Box 307, Seabrook, New Hampshire 03874; its wholly-owned subsidiary BAILEY
TRANSPORTATION PRODUCTS, INC. ("BTP"), a Delaware corporation, with its
principal place of business at 333 Gore Road, Conneaut, Ohio 44030; and BAYBANK,
a Massachusetts trust company, with its principal place of business at 7 New
England Executive Park, Burlington, Massachusetts 01803. (the "Bank") hereby
agree to further amend that certain Amended and Restated Credit Agreement dated
as of July 29, 1994 among Bailey, BMC, BTP and the Bank, as previously amended
by a First Amendment dated as of September 20, 1994, a Second Amendment dated as
of April 6, 1995, a Third Amendment dated as of May 12, 1995, a Fourth Amendment
dated as of July 28, 1995 and a Fifth Amendment dated as of September 1, 1995
(the "Credit Agreement"). Terms defined in the Credit Agreement shall have the
same meaning herein as in the Credit Agreement.
Bailey, BMC, BTP and the Bank agree the Credit Agreement shall be
amended as follows:
A. Section 1.2 of the Credit Agreement is hereby deleted and the
following is substitute therefor:
1.2 The Term Notes. The original advance under the Term Credit
was evidenced by a promissory note dated December 30, 1988 in the form
of Exhibit A- 1 attached hereto (the " 1988 Term Note") of Bailey and
BMC payable to the Bank in the principal amount of $5,280,000 which has
been paid in full. The amount borrowed by Bailey under the 1994 term
facility is evidenced by a promissory note in the form of Exhibit A-2
attached hereto (the " 1994 Term Note"), payable to the Bank in the
principal amount of $8,000,000 dated as of July 29, 1994 and delivered
at the closing under the 1994 Term Note (the " 1994 Term Loan
Closing"). The 1994 Term Note shall bear interest as provided in
Section 1.7. The principal of the 1994 Term Note is payable in equal
monthly installments of $66,667 commencing October 1, 1994 with a final
installment in the amount of the then remaining balance of principal
and interest on September 1, 1999. Payments of interest and principal
on the 1994 Term Note (sometimes hereinafter referred to as the "Term
Note") shall be due on the first day of each month.
B. Section 1.7 of the Credit Agreement is hereby deleted and the
following is substitute therefor:
1.7 Interest on the Term Note and the Revolving, Credit, Pricing
Options. The Borrower shall pay interest on the unpaid principal amount
of each Note at the following rates per annum, as selected by the
Borrowers, as provided below:
(a) Prime Rate Defined.
As used herein "Prime Rate" shall mean the annual
rate of interest announced by the Bank from time to time as its "prime
rate" which is a reference rate and not necessarily the lowest rate
charged by the Bank to customers.
(b) Interest on the 1994 Term Note.
(1) Prime Rate Advance. Loans or advances based on
the Bank's Prime Rate ("Prime Rate Advances"), shall bear interest at
the Prime Rate plus 1. 5 % payable monthly in arrears.
(2) Eurodollar Advances. Loans or advances based on
the London interbank offered rate (or "LIBOR" as defined below; each
such loan referred to herein as a "Eurodollar Advance"), shall bear
interest at the Eurodollar Rate plus 3.5 %, payable at the end of each
Interest Period, except in the case of an Interest Period of more than
three months in which case interest shall be payable on the 90th day
following the Advance. The "Eurodollar Rate" shall mean the rate per
annum, determined two Banking Days prior to the beginning of the
applicable Interest Period, equal to the quotient of (a) LIBOR divided
by (b) a number equal to 1.0 minus the rate (expressed as a decimal) of
the reserve requirements (including without limitation, basic,
supplemental, marginal and emergency reissues) under any regulation
promulgated by the Board of Governors of the Federal Reserve System (or
any other governmental authority having jurisdiction over the Bank) as
in effect from time to time dealing with reserve requirements
prescribed for eurocurrency funding including any reserve requirements
with respect to "eurocurrency liabilities" under Regulation D of the
Board of Directors of the Federal Reserve System. "Banking Day" shall
mean any day on which the Bank is open in Burlington and, if such day
relates to a borrowing of, a payment or prepayment of principal or
interest on a Eurodollar Advance or a notice by the Borrower with
respect to any such borrowing, payment, prepayment, a day which is also
a day on which dealings in Dollar
2
deposits are carried out in the London interbank market. "Interest
Period" shall mean such period commencing on the date such Eurodollar
Advance is made and ending, in the case of Eurodollar Advances under
the Term Note, on the third or sixth monthly anniversary of such date
and in the case of Eurodollar Advances under the Revolving Credit on
the first, second or third monthly anniversary of such date, as
selected by the Borrower. "LIBOR" shall mean for a subject Interest
Period, the rate of interest, at approximately 1 1:00 a.m. Burlington,
Massachusetts time, two Banking Days prior to the first day of such
Interest Period, as being the rate at which deposits in Dollars are
offered to the Bank by first-class banks on the London interbank market
for deposits for such Interest Period in amounts comparable to the then
aggregate principal amount of the requested Eurodollar Advance.
(c) Interest on the Revolving Credit (including Fixed
Maturity Carve Out Loan).
(1) Prime Rate Advances. Prime Rate Advances under
the Revolving Credit shall bear interest at the Prime Rate plus I %
payable monthly in arrears.
(2) Eurodollar Advances. Eurodollar advances shall
bear interest at the Eurodollar Rate plus 3.00% payable at the end of
each Interest Period, which shall be one, two or three months as
selected by the Borrower.
C. Section 1. 11 of the Credit Agreement is hereby deleted and the
following is substituted therefore:
1.11 Revolving Credit Borrowing Base.
a. For the purposes of the Revolving Credit, the Borrowing Base shall
equal (i) 85 % of the Borrowers' Qualified Accounts plus (ii) 50 % of
the Borrowers' Raw Materials and Finished Goods Inventory including
tooling; provided however that the inventory component of Borrowing
Base shall in no event exceed $6,000,000 and the inventory component
consisting of tooling shall in no event exceed $2,000,000 less (iii)
100% of the amount of all outstanding letters of credit issued for the
account of such Borrower. "Qualified Accounts" shall mean all accounts
in which the Bank has a first priority, perfected security interest;
which arose in the ordinary course of such Borrower's business; which
are not with respect to sales or services to a supplier or Affiliate of
such Borrower, which are not more than 60 days from the date of
issuance of the invoice; which are not subject to any dispute or claim
for setoff which has actually been asserted or any counterclaim; which
arise from non-governmental account debtors located in the
3
United States (and Ford Motor Company of Canada Ltd., Ford Motor
Company of Mexico, Canadian affiliates of General Motors Company,
Diamond Star Motors and Chrysler Corporation, Canada) and which the
Bank has not otherwise determined to be unsatisfactory. "Finished Goods
Inventory" shall mean goods, merchandise or other personal property in
a state ready to sell to customers of Bailey, BMC or BTP, as the case
may be, which is valued at the lower of cost or market (net of all
reserves for obsolescence), which the Bank has not otherwise determined
to be unsatisfactory and which is subject to the Bank's first priority,
perfected security interest. "Raw Materials Inventory" shall mean
resins, plastics, chemicals and other commodities purchased by Bailey.
BMC or BTP, as the case may be, for conversion into Finished Goods
Inventory and located at facilities of Bailey, BMC or BTP, as the case
may be. which commodities are still in an unprocessed state, are valued
at the lower of cost or market (net of all reserves for obsolescence)
and which are subject to the Bank's first priority, perfected security
interest. Work in process, consigned inventory, packaging inventory and
inventory subject to claims under any so-called "Bulk Sales"
legislation shall not be included in Raw Materials Inventory or
Finished Goods Inventory and shall have a Borrowing Base value of zero.
b. Bailey, on its own behalf and as agent for the Borrowers, shall
deliver to the Bank the following reports, in form satisfactory to the
Bank, signed by the Treasurer or Chief Financial Officer of such
Borrower:
(i) On a monthly basis, but more frequently if requested by
the Bank, a repor of sales, collection, ineligible accounts,
credit memos and Borrowing Base, with supporting schedules in
reasonable detail; each such report shall be received by the
Bank within three Banking Days of the last date covered by
such report.
(ii) On a monthly basis, but more frequently if requested by
the Bank, a report of inventory designations; each such report
to be delivered to the Bank within ten Banking Days of the
date of such report.
(iii) On a monthly basis within 15 days of the close of each
monthly accounting period, a report setting forth an aging of
accounts receivable as at the end of such monthly accounting
period and a reconciliation of accounts from the prior monthly
report and such other information as the Bank may reasonably
require.
4
The Bank shall have no obligation to make advances under the Revolving Credit
unless the Bank has received the reports and information required under this
section.
This Amendment may be executed in several counterparts, each of which
shall be anoriginal, and with the same effect as if signatures thereto were all
upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized representatives as of March 1, 1996.
BAYBANK BAILEY CORPORATION
By: /s/ James F. Carr, VP By: /s/ L.J. Heilman
--------------------- ---------------------
Executive Vice President
BAILEY MANUFACTURING
CORPORATION
By: /s/ L.J. Heilman
----------------------
Executive Vice President
BAILEY TRANSPORTATION
PRODUCTS, INC.
By: /s/ L.J. Heilman
----------------------
Executive Vice President
5
RELEASE AND SETTLEMENT AGREEMENT
THIS RELEASE AND SETTLEMENT AGREEMENT ("Agreement") is made on the 14th
day of March, 1996, by and between BAILEY CORPORATION, a Delaware corporation
("Bailey") and PREMIX/E.M.S. INC., and Ohio corporation ("EMS") (referred to
collectively as the "Parties").
WHEREAS, on July 31, 1994, Bailey and EMS entered into an Asset Purchase and
Sale Agreement (the "Sale Agreement") pursuant to which substantially all of
EMS' assets used in its Business (as defined in the Sale Agreement) were sold to
and purchased by Bailey.
WHEREAS, on January 31, 1996, principal in the amount of $625,000.00 and accrued
interest in the amount of $306,705.30 became due and payable by Bailey to EMS
pursuant to that certain Secured Promissory Note (the "Secured Note") executed
by Bailey contemporaneously with and as part of the Sale Agreement; and
WHEREAS, on January 31, 1996, accrued interest in the amount of $360,000.00
became due and payable by Bailey to EMS pursuant to that certain Convertible
Debenture (the "Debenture") executed by Bailey contemporaneously with and as
part of the Sale Agreement; and
WHEREAS, on July 31, 1996, principal in the amount of $625,000.00 and accrued
interest in the approximate amount of $315,000.00 will become due and payable by
Bailey to EMS pursuant to the Secured Note, and accrued interest in the amount
of $360,000 will become due and payable by Bailey to EMS pursuant to the
Debenture; and
WHEREAS, since October, 1995, Bailey has failed to comply with the covenant set
forth in Section 17(j) of the Debenture; and
WHEREAS, on or about January 25, 1996, Bailey filed a lawsuit against EMS in the
United States District Court for the District of New Hampshire seeking an
injunction against EMS to prevent EMS from enforcing the provisions of the
Secured Note and Debenture; and
WHEREAS, pursuant to an agreement dated January 31, 1996, as extended by three
subsequent agreements, Bailey and EMS agreed to extend the time of performance
of the payments originally due January 31, 1996, as stated above, to March 14,
1996; and
WHEREAS, the Parties have attempted to resolve numerous differences between
themselves without recourse to expensive and time-consuming litigation, and now
desire to enter into this Agreement as follows; and
NOW THEREFORE, in consideration of the mutual agreements and other consideration
contained herein, the Parties agree as follows:
1. This Agreement shall be binding on both Bailey and EMS from the date of
execution of this document.
2. This Agreement will supersede the agreement entered into between Bailey and
EMS on January 31, 1996, as extended and described above.
3. The Secured Note, Debenture, and related Security Documents will remain in
effect as they have been executed.
4. A new note ("New Note A"), in the form attached hereto as Exhibit A, from
Bailey to EMS in the amount of $1,291,705.30 will be executed, with principal
and interest accruing from January 31, 1996, at 8% per annum, becoming due and
payable on January 31, 1997, with no interim payments of principal or interest
required. Bailey agrees to use its best efforts, as determined in its sole and
absolute discretion, to provide
security for New Note A, and shall amend New Note A accordingly. New Note A
shall be in satisfaction of the principal and interest originally due and
payable by Bailey to EMS on January 31, 1996 pursuant to the Secured Note and
Debenture.
5. An additional new note ("New Note B"), in the form attached hereto as Exhibit
B, will be issued on July 31, 1996, from Bailey to EMS in an amount equal to the
principal and interest which will then be due from Bailey to EMS under the
Secured Note and Debenture (the approximate amount is $1,300,000.00), with
interest accruing from July 31, 1996 at 8% per annum, and principal and interest
becoming due and payable on July 31, 1997, with no interim payments of principal
and interest required. Bailey agrees to use its best efforts, as determined in
its sole and absolute discretion, to provide additional security for New Note B,
and shall amend New Note B accordingly. New Note B shall be in satisfaction of
the principal and interest originally due and payable by Bailey to EMS on July
31, 1996, pursuant to the Secured Note and the Debenture.
5a. EMS waives compliance with the financial ratio provision in Section 17(j) of
the Debenture through October 31, 1997.
6. As part of the consideration paid by EMS to Bailey in exchange for Bailey's
agreement to settle all arbitration, indemnification, and other claims released
herein, EMS will pay to Bailey the sum of one million dollars ($1,000,000), but
only upon such date as Bailey has paid in full all principal and interest due
under Secured Note, New Note A and New Note B, and upon payment in full of all
principal and interest due under the Debenture (whether paid in cash or
satisfied in stock of Bailey). The final payments by Bailey to EMS of all
remaining amounts due under the Secured Note, New Note A and New Note B, and the
payment by EMS to Bailey of $1,000,000 will be done in a simultaneous
transaction and by certified checks, if requested in writing by either EMS or
Bailey.
7. Within three business days of the receipt by EMS of the $500,000.00 held in
the Environmental Escrow Account by Huntington Bank (Ohio) ("Escrow Account"),
as
provided for in the Environmental Indemnification Agreement entered into by and
between Bailey and EMS on July 31, 1994 ("Environmental Indemnification
Agreement"), EMS shall pay to Bailey the sum of $250,000.00. Such release of the
$500,000 in the Escrow Account shall have no effect on EMS' obligations in the
Environmental Indemnification Agreement.
7a. Bailey and EMS both represent that all real estate and personal property
taxes for the year 1994 attributable to the assets conveyed in the Sale
Agreement have been paid to the appropriate taxing authority. This
representation by both Bailey and EMS is a condition precedent to the net
payment by EMS to Bailey described on Exhibit C.
8. Except as provided in paragraph 9, Bailey hereby, for itself and its
affiliates, successors and assigns, releases and discharges fully EMS, its
affiliated companies including parent and subsidiary companies, and divisions,
and their directors, officers, employees, agents, successors and assigns from
any and all claims, liabilities, demands and causes of action, known or unknown,
under any tort, contract, strict liability, product liability, negligence,
fraud, misrepresentation or any other theory of recovery, resulting from,
arising out of, related to or associated with any matters pertaining to or
arising out of The Sale Agreement including, but not limited to, any of the
issues previously arbitrated by the Parties, or any of the issues enumerated in
Exhibit "C", attached hereto and made a part hereof.
9. The provisions of paragraph 8 shall not apply to the matters listed on
Exhibit D, attached hereto and made a part hereof.
10. Both Bailey and EMS represent that the execution and delivery of this
Agreement have been duly authorized and approved, that no other corporate
proceedings on the part of either Bailey or EMS are necessary with respect
thereto, and that this Agreement constitutes the legal, valid and binding
obligation of both Bailey and EMS, enforceable against both Bailey and EMS in
accordance with its terms.
11. Each party shall be solely responsible for its own costs, including
attorneys' fees, associated with this Agreement and the subject matter hereof,
including all arbitration proceedings, litigation, and negotiations through the
date of this Agreement.
12. This Agreement shall be confidential to the Parties, and no disclosure nor
public announcement other than required by law or contract will be made without
the written consent of the non-disclosing Party.
13. This Agreement shall be interpreted in accordance with the laws of the State
of Ohio. All terms, conditions and covenants of the Agreement shall be
applicable to and binding upon, and shall inure to the benefit of, the parties'
respective agents, employees, subsidiaries, divisions, successors and assigns.
14. In the event that any suit in law or equity, arbitration or other formal
proceeding is instituted by any party to enforce or interpret any part of this
Agreement, or to recover damages for breach hereof, the prevailing party shall
be entitled to recover costs of suit incurred therein, and to also recover as an
element of such costs (but not as damages) reasonable attorneys' fees incurred
by such prevailing party.
15. This Agreement constitutes the entire agreement and understanding between
the parties concerning the matters described herein, and superseded and replaces
all prior negotiations, representations, proposed agreements, and agreements,
written or oral, relating to such subject matter.
In witness whereof, the parties have caused this Agreement to be duly
executed in duplicate and delivered as of the date written above.
BAILEY CORPORATION PREMIX/E.M.S. INC.
By: /s/ Roger R. Phillips By: /s/ John R. Maimone
---------------------- --------------------
Name: Roger R. Phillips Name: John R. Maimone
Title: President & CEO Title: CEO
Exhibit C
SUMMARY OF ISSUES
-----------------
Damages incurred from August, 1994 through January, 1995 as a result of the
Seller's misrepresentations as to the profitability of the Diamond Star
Motors Contract.
Damages incurred from August, 1994 through January, 1995 as a result of the
Seller's misrepresentations as to the profitability of the Stanley Door
Contract.
Damages incurred from April, 1995 through January, 1996 as a result of the
Seller's misrepresentations as to the profitability of the ITT/Chrysler
Nose Cone Contract.
Continuing damages inevitably to be incurred in the future in connection
with the ITT/Chrysler Nose Cone Contract.
Damages incurred from August, 1995 through January, 1996 as a result of the
Seller's misrepresentations as to the profitability of the GMH-Car Spoiler
Contract.
Continuing damages inevitably to be incurred in the future in connection
with the GMH-Car Spoiler contract.
Damages incurred as a result of the Seller's August 2, 1994 loss in the
month of July, 1994.
Damages resulting from the Seller's breach of covenant as to the funding of
employee benefit plans.
Damages incurred as a result of the Seller's failure to pay the full amount
of the December, 1995 arbitration award.
Damages in the amount of interest paid on $11.7 million of additional bank
borrowings to pay for the swing from profit to loss.
Consequential damages incurred with respect to Bailey's relationship with
its shareholders, customers, suppliers and creditors as a result of the
financial damages from the above acts.
Damages incurred relative to product and tooling contracts with Saturn.
Damages incurred relative to product and tooling contracts for General
Motors J-car.
Any other damages or profitability issues relative to any other product and
tooling contracts acquired from Premix/EMS and not enumerated specifically
above.
Upon payment of $12,000 (to be made within 30 days of the date of this
Agreement) by EMS to Bailey for survey work to be performed by Bailey,
Paragraph 8 of the Agreement shall apply to any matter involving the
completion and any cost of survey of the three facilities as required by
Section 6.7 of the Asset Purchase and Sale Agreement.
EMS acknowledges that it owes to Bailey 7/12ths of the real estate and
personal property taxes for the year 1994 in Indiana and Ohio, as noted in
correspondence of May 1995 and February 1996, in the amount of $181,800.55.
Bailey acknowledges that it owes to EMS 5/12ths of the personal property
taxes for the year 1994 in Ohio, in the amount of $58,942.08. Upon payment
by EMS to Bailey of the net of these amounts, which net is $122,858.46 (to
be paid within 30 days of the date of this Agreement), Paragraph 8 of the
Agreement shall apply to all obligations of EMS and Bailey under the Asset
Purchase and Sale Agreement for real estate and personal property taxes.
EXHIBIT D
Pursuant to Paragraph 9 of the Agreement, the provisions of Paragraph 8
shall not apply to the following matters:
1. Environmental Indemnification Agreement
2. All permanent indemnification matters that are part of Section 4.1(a) of the
Non-Environmental Indemnification Agreement and which are specified below:
a. Section 4.1(a)(i).
b. Section 4.1(a)(ii), but only if it concerns matters other than EMS'
funding of employee benefit plans.
c. Section 4.1(a)(iii).
d. Section 4.1(a)(vi), but only to the extent that such costs and
expenses are directly related to any of 2a-c of this paragraph.
3. All warranties of EMS set forth in the three warranty deeds relating to the
real estate conveyed by EMS to Bailey and located in Lancaster, Ohio; Hartford
City, Indiana; and Portland, Indiana.
4. Any defects or exceptions noted by Bailey's surveyors upon completion of the
surveys of the three properties referenced in Paragraph 3.
5. The Funding Agreement entered into on July 31, 1994, by and among Bailey,
EMS, Premix, Inc., an Ohio corporation of North Kingsville, Ohio, and Shell
Polymers Ventures, Inc., a Delaware corporation of Houston, Texas.
EXTENSION AGREEMENT AND AMENDMENT
This Agreement is made this 24th day of April, 1996 by and between
Bailey Corporation ("Bailey") and Bailey Manufacturing Corporation ("BMC"), both
Delaware corporations of Seabrook, New Hampshire; and The Boler Company, a
Delaware corporation of Itasca, Illinois ("Boler"),
WITNESSETH
In consideration of the mutual covenants contained herein, the parties
agree as follows, to wit:
1. Recitals.
1.1 On July 1, 1993, BMC acquired certain assets and operations from
Boler.
1.2 In part payment for the purchase price, BMC and Bailey as co-makers
executed a non-negotiable promissory note in favor of Boler in the principal
amount of $5,046,730 (the "Fixed Asset Note")..
1.3 By its terms, the Fixed Asset Note provided that July 1, 1996 is
the "Fixed Asset Note Extension Date". Interest on the Fixed Asset Note was to
be paid semi-annually as accrued, commencing six months from the date of issue.
To date, all accrued interest scheduled to be paid has been timely paid to
Boler.
1.4 The Fixed Asset Note provides that the principal amount of the
Fixed Asset Note will be increased by a factor of 17.65% plus interest on the
amount determined by this factor from July 1, 1993 through the Fixed Asset Note
Extension Date at a rate of 8% per annum if it is not paid in full on the Fixed
Asset Note Extension Date.
1.5 BMC and Bailey have requested Boler to reschedule the Fixed Asset
Note Extension Date. Boler has agreed to do so, and in consideration of that
indulgence, BMC and Bailey have agreed to accept an increase in the rate of
interest on the Fixed Asset Note.
2. Extension and Amendment. The Fixed Asset Note is hereby amended as follows:
2.1 The Fixed Asset Note Extension Date is extended to the earlier to
occur of November 1, 1996 or the date of any transaction, or of the culmination
of a series of transactions, by which a majority of the shares of the voting
stock of either BMC or Bailey is sold or otherwise changes hands or by which
more than one half of the assets
(as determined by their book value) of either BMC or Bailey is sold or otherwise
changes hands. The first sentence of Section 1 of the Fixed Asset Note and the
payment schedule at the top of page 2 on the Fixed Asset Note are hereby amended
accordingly.
2.2 The rate of interest on the unpaid principal balance of the Fixed
Asset Note is increased to Nine percent (9%) for the period from July 1, 1996 to
and including the Fixed Asset Note Extension Date established in accordance with
Section 2.1 (the "Extension Period"). Interest accrued during the Extension
Period, increased in accordance with the preceding sentence, shall be payable on
the Fixed Asset Note Extension Date, as rescheduled in accordance with Section
2.1 above.
2.3 The parties further agree that each of the Collateral Agreements
(as that term is defined in the Agreement of Purchase and Sale, dated July 1,
1993 amongst the parties hereto) and the Agreement of Purchase and Sale itself
shall be (and hereby is) amended consistent with the foregoing amendments of the
Fixed Asset Note, and each party agrees on request of any other party to execute
further documents evidencing these amendments to each of the Collateral
Agreements and to the Agreement of Purchase and Sale.
3. Reaffirmation. Subject only to the foregoing extension and amendment, BMC and
Bailey hereby reaffirm and ratify the original terms and conditions of the Fixed
Asset Note and of each of the Collateral Agreements. BMC and Bailey each waives
any defenses to the Fixed Asset Note and each of the Collateral Agreements which
might be otherwise asserted in consequence of the modifications agreed to herein
by the parties to the Fixed Asset Note and each of the Collateral Agreements.
4. Miscellaneous. This Agreement shall be governed by the laws of State of
Delaware without regard to conflict of law principles. The Agreement shall be
binding upon the parties hereto, their successors in interest and assigns.
Nothing in this Agreement shall be deemed to modify any of the rights or
obligations of each of the parties under the Agreement of Purchase and Sale
dated July 1, 1993, nor shall it be construed as in any fashion modifying,
limiting, waiving or affecting any of the rights or obligations of Boler under
an Intercreditor Agreement, dated July 1, 1993 between Boler and BayBank.
In witness whereof, the parties have by their officers duly authorized
set their hands and seals this 24th day of April, 1996.
ATTEST BAILEY CORPORATION
/s/ William A. Taylor By: /s/ Roger Phillips
- ----------------------- ------------------
Its: President & CEO
Duly Authorized
ATTEST BAILEY MANUFACTURING CORPORATION
/s/ William A. Taylor By: /s/ Roger Phillips
- ----------------------- ------------------
Its: President & CEO
Duly Authorized
ATTEST THE BOLER COMPANY.
/s/ Nancy B. Coons By: /s/ John M. Gaynor
- -------------------- ------------------
Its: Vice President
Duly Authorized
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from S.E.C. Form
10-Q for the quarterly period ended April 28, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-30-1995
<PERIOD-START> JUL-31-1995
<PERIOD-END> APR-28-1996
<CASH> 402
<SECURITIES> 0
<RECEIVABLES> 28,278
<ALLOWANCES> (863)
<INVENTORY> 20,010
<CURRENT-ASSETS> 55,912
<PP&E> 73,111
<DEPRECIATION> (23,332)
<TOTAL-ASSETS> 114,753
<CURRENT-LIABILITIES> 65,004
<BONDS> 30,916
0
0
<COMMON> 540
<OTHER-SE> 12,629
<TOTAL-LIABILITY-AND-EQUITY> 114,753
<SALES> 128,681
<TOTAL-REVENUES> 128,681
<CGS> 132,617
<TOTAL-COSTS> 132,617
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,597
<INCOME-PRETAX> (7,533)
<INCOME-TAX> (1,809)
<INCOME-CONTINUING> (5,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,724)
<EPS-PRIMARY> (1.05)
<EPS-DILUTED> (1.05)
</TABLE>
